JP Morgan's Goal: $1.2100 per Euro

Investors still doubt about America's economic recovery

The reduction of the dollar value last Wednesday was originally thought to be in reaction to active sales of American stocks. Investment funds and American investment banks started selling the currency as well - it had a greater influence on the situation with the USD.

The new reduction took place under the condition of the economic data vacuum. The dollar lost one percent against the euro, the Swiss franc, the pound sterling, the Australian and the Canadian dollar. The euro raised to the level of $1.1825, having gained 1.25 percent. The USD slid by 1.33 percent vs. the Swiss franc, the British pound reached $1.6942, having gained 1.20 percent because of rumors about the possible increase of rates.

"There is no data, no news that triggered this dollar sell-off. Lower stock markets started it and as the momentum built up, model funds were generally pushed back into short-dollar positions," Rebecca Patterson, currency strategist at J.P. Morgan Chase in New York said. The strategist believes, investors have doubts about the perspectives of the American economic recovery - there is no other explanation to the insufficient inflow of the foreign capital in the country.

"The stock market was rather heavy, it was showing indications of a large-scale correction. As soon as it happened, the stock sales suppressed the dollar during the whole operational day in New York," Alan Ruskin, research director at 4Cast Inc in New York, said. "This is just an extension of the long-term dollar downtrend, with the high-yielders doing well and the others following," said Meg Browne, currency strategist at HSBC Bank USA in New York. Browne agrees with JP Morgan - the euro will eventually overcome the maximum level of $1.1932.

JP Morgan's goal is $1.2100 for euro/dollar, CHF1.2850 - for the Swiss franc. Tim Stewart, currency strategist from Morgan Stanley in New York does not think that the reduction of the dollar will continue in the way as it happened on Wednesday. Kenneth Landon, senior currency strategist at Deutsche Bank in New York believes that nobody thinks that the American government is interested in the strong dollar. David Gilmore at FX Analytics believes that the dollar will depend on the exterior instability of the US: one will have to raise interest rates to increase the inflow of the foreign capital in America, otherwise, the trade balance deficit will prevail over the currency rate.

Jonathan Coughtrey, analyst at MMS, said the three currencies of Australia, Canada and New Zealand were being broadly helped by expectations of the rise of the world economy, that take the prices on raw materials higher (they are called commodity currencies because of that).

The expectations of the interest rate increase in New Zealand  has affected the situation too. Kenneth Landon believes, the expectations for several central banks to raise interest rates have been pressing on the dollar too. Sean Callow, IDEAglobal currency analyst said that in addition to the Bank of England, the Reserve Bank of Australia  could raise the rates already in November against the background of the flexible domestic demand and the low unemployment level.

ForexPF for PRAVDA.Ru